Research & Insights

Sustainable Investing & ESG Policy

Sustainable Investing and Environmental, Social, and Governance (“ESG”) integration are strategic priorities for Bridgewater. Our approach to these issues is shaped both by who we are as an investment manager—a global macro investor with a fundamental, systematic, and diversified approach to investment research and portfolio construction— and by how we partner with clients.

As a global macro, multi-asset manager, our first investment goal is to build a deep understanding of how economies and markets work. Because ESG issues are important drivers of global economies and markets, we have explicitly made it a strategic priority to deeply research these issues and to integrate that research into our investment process in a manner that is consistent with our systematic way of managing money. We believe our research approach is well-suited to explore the fundamental ESG-related linkages at play in the same way we study other cause-and-effect linkages in the global economy and markets.

Our second goal is to convert the understanding we have built into high-quality solutions for our clients’ most important investment objectives. The framework we use for integrating ESG considerations into portfolios depends on the portfolio’s objectives. For portfolios with traditional return and risk objectives, we research ESG issues that we believe may have a material impact on financial performance, and this research is integrated as part of our broader investment research process. For example, we have researched the economic and market implications of climate risk and the transition to a net zero emissions economy and incorporated this research into our strategies in the form of risk controls. Alongside return and risk considerations, an increasing number of clients have added a third dimension to their investment objectives, namely impact. For these portfolios, we are partnering with clients to consider not only how ESG-related issues might affect return and risk, but also how aligned these portfolios are with environmental and social outcomes—the All Weather Sustainability strategy is our first strategy that explicitly seeks to achieve return, risk, and impact.


Our co-CIOs for Sustainability, Karen Karniol-Tambour and Carsten Stendevad, are responsible for embedding sustainability considerations across Bridgewater’s investment processes and for designing and overseeing those portfolios that pursue both financial and impact goals. They co-chair our Sustainable Investing Committee, which is responsible for developing and governing Bridgewater’s investment research, portfolio construction, stewardship, standards and processes as they relate to ESG and sustainable investing. The Committee includes Daniel Hochman, Head of Sustainability Research, and is supported by a full-time, dedicated research staff. Karen is also a member of Bridgewater’s Investment Committee, which is responsible for all aspects of the firm’s investment research process, ensuring ongoing integration across the firm’s investment priorities.

Our Sustainable Investing and ESG Policy is directly overseen by our Sustainable Investing Committee and reviewed on a regular, ongoing basis. The Sustainable Investing Committee also provides quarterly business updates to the co-CEOs as well as ongoing updates to Bridgewater’s Investment Committee, which may result in updates to the Policy. The overall Policy and any changes are periodically reviewed by Bridgewater’s Legal and Compliance team (see: “Quality Control and Compliance in Our Sustainability Efforts” for more detail).

2-D Approach: Incorporating ESG to Achieve Financial Goals (Return and Risk)

Our starting point as investors has always been to understand how the world works. In service to that mission, we conduct deep, fundamental research across a broad range of topics—we believe markets and economies move for logical reasons that can be studied and understood, and that once we understand how something works, we systemize that understanding into our investment process and compound on it through time. We then convert that accumulated understanding into insights and portfolio solutions for our clients. In addition, we share important findings from our research with our clients and, in a number of cases, policy makers and the public at large.

Because the core of our investment approach is to deeply understand global economies and markets, environmental, social, and governance issues are inherently important for us to understand. ESG considerations can directly impact economic and market outcomes and the actions of policy makers. As such, we seek to deeply understand these topics by studying them as an integrated part of our research process and prioritize topics that we believe are most pertinent to our macro investment approach—in other words, those topics we think have material financial (return/risk) relevance to our portfolios.

Since many ESG issues have clear macro linkages in nature, we believe that we are well positioned to explore the fundamental linkages at play. Leveraging our 45+ years of experience in conducting deep, systematic macro research, we conduct extensive research on a wide range of topics related to ESG, such as the divergences between social and economic conditions, populism and social inequality, the economic impacts of climate change, and the shift toward renewable energy and the transition away from fossil fuels, to name a few.

In recent years, we have researched how social issues are increasingly impacting economic and market outcomes. Our researchers perceived that the growing divergences across households of different income and wealth levels were making some aggregate economic statistics (e.g., GDP growth) less useful as indicators of future spending. This perception led us to questions not only about the accuracy of our spending estimates, but also about the effects of inequality on social cohesion, populism, and conflict. The answers to these questions are critical for understanding the investment landscape, as these issues are increasingly influencing the decisions of fiscal and monetary policy makers. The results of this research have been incorporated into our investment systems and synthesized in the form of reports shared with our clients. Examples include Populism: The Phenomenon and Social Conditions Are an Increasing Consideration for How the Economy Will Be Managed.

Furthering our understanding of environmental and climate change considerations is another priority for us. Climate change will be one of the defining issues of the 21st century and addressing it will create significant shifts in the underpinnings of the global economy. A successful transition away from carbon will require major responses from governments, companies, investors, and other actors around the world. From an investor perspective, climate change is a multidimensional topic that affects asset markets and economies through many different channels, such as direct physical effects (e.g., rising temperatures and related effects) as well as through the impact on transition-related regulation, investment, capital flows, changes to commodity consumption, etc. We have investigated a wide range of climate-related issues, such as the fundamental challenges with macroeconomic modeling of physical climate risks, the risks to assets and portfolios under different possible climate transition scenarios, and the inflationary effects of climate-related regulations, as well as the impact of the shift toward greener energy sources on oil and industrial metals, China’s shift toward renewable energy, and the implications of the decline of coal.

As new understanding is uncovered, we seek to systemize and incorporate it into Bridgewater’s broader understanding of how markets and economies work and utilize it to trade markets. For example, our research into low-carbon economy scenarios flows into our projections on the impact of demand for commodities (e.g., industrial metals and energy). We also seek to incorporate our understanding of ESG issues into our fundamental risk controls process. For example, we utilize our understanding of how our various asset holdings around the world would perform under different climate transition scenarios (e.g., a faster shift to a low-carbon economy) to build risk caps tailored to climate risks.

In general, the research we publish provides the best window into the types of ESG-related research that we prioritize incorporating into our investment systems. As mentioned above, we share research throughout the year via the Daily Observations and synthesize our views on an annual basis to our clients in our Sustainable Investing Annual Report.

3-D Approach: Building Portfolios to Achieve Financial and Impact Goals

Alongside return and risk considerations, an increasing number of institutional investors are focused on a third dimension: the impact that their portfolios have on environmental and social outcomes. These investors explicitly want to direct capital toward the types of investments that they see as most aligned to their impact goals. As our clients started adopting such impact goals, we did what we have always done and partnered with them to find solutions to achieve their goals.

Using Bridgewater’s fundamental, systematic, and diversified approach to research and portfolio engineering expertise, our Sustainable Investing team has prioritized examining how to construct scalable portfolios that address investors’ three-dimensional goals: return, risk, and impact. We have built a systematic assessment process for evaluating whether securities across asset classes are aligned with the UN Sustainable Development Goals (SDGs). We have selected the alignment with the SDGs as the foundational framework for this approach because they are oriented toward positive environmental and social impact, are widely accepted by governments and asset owners, and contain specific and measurable indicators that help investors and researchers to assess whether a given entity is helping to achieve any of the 17 goals. Further, because of the central role that climate plays in the SDGs, many climate-related metrics inform our overall assessments, and therefore this approach helps us reach a nuanced picture of assets’ alignment with combating climate change.

The All Weather Sustainability strategy is our first portfolio that deploys this sustainability assessment process and is designed to be a strategic (beta) portfolio solution for investors who seek to achieve both financial and impact goals at scale. We chose to focus on building a strategic portfolio because ~90% of the risk in typical institutional portfolios is in the strategic asset allocation, so engineering a quality strategic asset allocation represents a crucial foundation for investors’ financial and impact goals. The strategy is designed to generate a higher ratio of return to risk than traditional portfolios, while also being significantly more aligned to the UN SDGs than traditional portfolios. For more detail, see our chapter in the publication, Sustainable Investing: A Path to a New Horizon.[1]

[1] Note on portfolio exclusions: As it pertains to our asset holdings and exclusion lists, we ensure that we are compliant with all applicable sanctions. We do not have a firmwide exclusion list across portfolios that excludes investments solely for environmental or social impact reasons. In strategies with explicit impact goals, we impose stringent sustainability selection criteria. Our sustainability assessment approach seeks to identify the securities that are the most aligned to the UN SDGs or are on a clear and credible pathway towards SDG alignment, rather than excluding only the least aligned.

Stewardship and Corporate Engagement Policy

Bridgewater’s Stewardship and Corporate Engagement Policy is set, implemented, and overseen by the Sustainable Investing Committee, and spans corporate engagement, proxy voting, and collaborative engagements with a broad range of industry actors including data providers, research institutions, industry partners, and our clients. The policy adheres to the guidelines of the Principles for Responsible Investing (PRI) and has two overarching objectives: advancing our portfolio objectives across return, risk, and impact, as well as improving our understanding of company-specific sustainability issues.

Our stewardship and collaborative engagement efforts focus on a set of cross-cutting themes including supporting the transition to a low-carbon economy while managing the environmental and labor rights risks that may exist within the operations / supply chains of companies involved in the transition; combatting modern slavery; strengthening board focus on ESG and diversity issues; and improving the disclosures of quality sustainability information. Our Sustainable Investing Annual Report details our 2021 activities.

Below, we provide more details on our approach to corporate engagement, proxy voting, and collaborative engagements:

Corporate Engagement

Our Philosophy and Objectives: We believe in the value of constructive engagements between companies and investors to drive both financial and sustainability outcomes. Our Sustainable Investing Committee is responsible for our overall engagement strategy, including prioritizing thematic areas, selecting target companies, and overseeing the integration of engagement outcomes into our systems.

We have spent the last several years developing a systematic process to assess the sustainability of securities, both in terms of the sustainability of their products and services and their business behavior. This capability underpins our impact-oriented strategies like All Weather Sustainability and is foundational for our ability to engage with companies credibly and constructively.

Our Sustainable Investing Committee is responsible for our overall engagement strategy, including prioritizing thematic areas, selecting target companies, and using engagements to triangulate our sustainability assessments and integrate any outcomes into our systems. When engaging with companies, we start by identifying situations where engagement may materially enhance a company’s sustainability performance, based on our systematic assessment of their products and services and their business behavior. For example, some companies in the cleantech sector whose products and services align with the UN SDGs (e.g., Goal 7: Clean and Affordable Energy, Goal 13: Climate Action) have room for improvement relating to responsible sourcing or the carbon emissions of their own operations. We focus on these issues during our targeted engagements, and we integrate learnings from the dialogue back into our systematic company assessments, in essence “closing the loop” across our end-to-end sustainability process. Although we are early in the journey on company engagement, we are already deriving tangible value from these corporate engagements in terms of advancing our impact objectives and improving our understanding of company-specific sustainability dynamics.

Our Thematic Approach: Because we generally have highly diversified equity portfolios with small ownership stakes, we have chosen to engage thematically and partner with other investors to push forward positive change across key industries. This is in line with our overall approach to stewardship and engagement, which emphasizes collaboration across multiple stakeholders. By approaching these engagements thematically, we aim to think broadly and deeply about the challenges that companies are facing, play a role in helping to shape industry standards and best practices, and be more targeted in specific conversations. We share thematic observations to our clients in our Sustainable Investing Annual Report.

Implementation and Execution: To help supplement and facilitate our engagements, we work with an engagement advisor—Sustainalytics—to effectively scale our engagement operations (company outreach, meeting coordination, documentation) and align our focus areas with other investors to strengthen our collective messaging. Our partnership with Sustainalytics is centered on a rigorous and constructive approach to engagement, which is aimed at “encouraging companies to improve their approach to themes identified and agreed to by the parties, resulting in reduced reputational and operational risks and raising standards at the sector level.”

We take a hands-on approach to working with Sustainalytics. At the strategy level, we have shared our policy with their leadership team and hold regular executive-level conversations regarding our philosophy, approach, and priorities. At the operational level, we also hold direct, active discussions with Sustainalytics’ engagement managers, in which we share our list of target companies (based on our systematic analysis of ESG behavior), discuss appropriate KPIs, step back on the progress of existing engagements, and discuss potential areas for improvement. We have found it valuable to engage with a broad range of companies from industry leaders to laggards, both because all companies have potential to improve on an absolute basis and because it gives us valuable insights into relative strengths and weaknesses. All members of our Sustainable Investing team (including our co-CIOs for Sustainability and Head of Sustainability Research) actively participate in the dialogues with companies. We have met with a range of company representatives from board members, CEOs, company secretaries, and C-suite executives to investor-relations and sustainability executives. Through our engagement services provider, we may choose to participate with other investors in conducting these engagements, but we will always retain our full discretion to act however we see fit and thus not acting as a formal consortium.

Per above, we report annual progress on our corporate engagement objectives, focus areas, and outcomes to our clients on annual basis.


Proxy voting in an integral part of our stewardship approach. Similar to our corporate engagement efforts, this policy is set, implemented, and overseen directly by our Sustainable Investing Committee. Additionally, we partner with Glass Lewis, a proxy advisor, to implement and vote our shares on behalf of our clients. Glass Lewis is a signatory to the PRI, abides by the principles set forth therein, and considers ESG issues in the process of generating all of their recommendations. We have shared our Sustainable Investing and ESG policy with Glass Lewis and have had executive-level conversations with them regarding our philosophy and approach. Based on these discussions, Bridgewater has directed Glass Lewis to apply their standard policy across all accounts (except All Weather Sustainability), as well as certain aspects of Glass Lewis’s climate policy as an overlay to the extent such guidelines are deemed to mitigate climate-related risk or enhance shareholder value.

Within All Weather Sustainability, we direct Glass Lewis to employ their explicit ESG proxy policy, which entails a particularly strong focus on environmental and social issues, as well as company disclosures. We maintain a high bar for companies in All Weather Sustainability and seek to hold them accountable to the highest possible standards on sustainability.

Details on our voting records are available to our clients in our Sustainable Investing Annual Report.

Additional detail on our proxy voting practices can be found in our Proxy Voting policy, which is available in our Form ADV 2A on the SEC’s website or upon request.

Collaborative Engagement

Collaborative engagements are an important part of our sustainability efforts. As a research-driven firm, we are constantly in the pursuit of new ideas, which we triangulate, test, and validate by comparing many diverse perspectives and explicitly drawing on external experts. Our clients are our closest collaboration partners, and we work with them on a broad range of issues, such as how to engineer sustainable portfolios, how to stress test portfolios to climate change scenarios, and evaluating sustainability data. We also seek to partner with other leaders in the global sustainable investing community, including academics, NGOs, and data providers on initiatives that align closely with our sustainability research objectives. We pursue these collective engagements in the spirit of our PRI commitment to work with others in the industry to enhance our collective effectiveness in integrating sustainability considerations into our investment processes.

As with our other stewardship efforts, we focus on collaborative engagements that help support a just transition to a low-carbon economy, improve board governance and diversity, and increase disclosures on quality sustainability data. For example, our co-CIO for Sustainability Karen Karniol-Tambour is on the leadership council of Harvard Business School’s Impact-Weighted Accounts Project, we engage with the Brookings Institution’s Center for Sustainable Development, and we support the Leaders’ Declaration of the Global Steering Group for Impact Investment.

In terms of external affiliations, Bridgewater is a signatory to the UN Principles for Responsible Investment and a supporter of TCFD, and we report to our clients in line with both standards on an annual basis (please see a selection of our TCFD report here). In addition, we are a core supporter of the Standards Board for Alternative Investments (formerly the Hedge Fund Standards Board), and a member of Focusing Capital on the Long Term, a non-profit that works to encourage a longer-term focus in business and investment decision-making.

Finally, we contribute our research and perspectives on sustainable investing to the broader public dialogue via external publications, conference series, and participation in industry surveys.

Quality Control and Compliance in Our Sustainability Efforts

Ensuring a high level of quality control and compliance throughout our sustainable investing effort is of paramount importance to us. We recognize that sustainable investing is still a nascent field with substantial conceptual and analytical challenges, imperfect data, and a lack of clear global standards. To address these challenges, we have designed an objective and systematic sustainability process, backed by a strong governance design, led by senior investors with clear lines of responsibility and subject to an independent review by Bridgewater’s compliance function.

Apply a rigorous, systematic process: The most important component of our quality control is the fundamental, systematic, and triangulated sustainability assessment process that we have built. Being systematic not only enables us to create quality assessments, but importantly it also requires us to clearly document our logic and automate our processes, which in turn allows us (and our independent compliance department) to ensure adherence to our intended processes and identify areas of weaknesses that we can improve upon. We approach the challenge with humility; while we are confident in our approach, we also expect our understanding to evolve as the data landscape continues to rapidly grow and as we continue to research the best methods for sustainability assessment.

Clear governance over sustainability integration led by senior investors: Our co-CIOs for Sustainability, Karen and Carsten, are responsible for embedding sustainability considerations across Bridgewater’s investment processes and for designing and overseeing those portfolios that pursue both financial and impact goals. With respect to the All Weather Sustainability strategy, they are responsible for all portfolio decisions, both financial and sustainability related. Further, Karen is a member of Bridgewater’s Investment Committee, which oversees all of Bridgewater’s portfolios.

Independent compliance process and testing program: All of Bridgewater’s key business processes, including our sustainable investing processes, are subject to review and are supported by Bridgewater’s independent Compliance Team, which advises on regulatory matters, monitors Bridgewater’s business activities, and conducts risk-based compliance testing to ensure that we are meeting or exceeding our regulatory obligations. The independent Compliance Team regularly assesses and adjusts its processes to keep pace with evolving regulatory requirements or industry standards related to sustainability or otherwise.

Finally, we have policies in place to identify and mitigate conflicts of interest, which we describe in sections 6, 10, and 12 in the Form ADV Part 2A and our Code of Ethics, both of which are available upon request. Bridgewater aims to identify all conflicts of interest that could incentivize, or even give the appearance of incentivizing, Bridgewater employees to make decisions that may not be in the best interest of our clients.

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